It’s All Relative

Parents can’t keep pace with soaring college prices
While college prices climb 38%, parent contributions drop by 8%

• Paying more with current income; Average loan up 50% in five years
• Parents now cover 55% of college prices; Savings make up only 25%
• Rising use of student loans, less planning/saving are factors

Washington, D.C., Oct. 14, 1998—A new report reveals a shifting landscape of who pays for college and how they are paying for it. Parents over the last decade are covering less of the growing price of their children's college education. While the average price of attending a four-year institution has risen by an inflation-adjusted 38% in the last 10 years, parental support has actually dropped by 8% in that period.

Overall, parents are relying on current incomes more, saving at far lower levels than needed to pay for college, and—for those who take out loans—borrowing higher amounts.

The report states that parents on average contribute 55% of the price of attending college, a decline from 69% in 1986. Student loans and other sources are making up the difference. Two-thirds of parents rely mainly on current income to finance college. The average total amount now saved for a college education is $9,956, or only about one year of the average price of a public, four-year college. For the 25% of parents who borrow for college, the average loan amount is up 50% over the last five years.

The study indicates that most parents are not going into debt to pay for their children's college education, but do contribute substantially: two-thirds supply cash gifts and 10% extend loans to their children. A full 80% of parents provide food, clothing, and transportation. The report also shows a high level of involvement by parents in their children's efforts to select, enroll, and plan financially for college.

The widening gap between higher prices and the levels of support provided by parents, according to the report, is the result of prices climbing faster than available funds. In addition, other factors, such as low saving levels for college, increased reliance on current income, and widespread availability of student loans may be impacting this trend. Parents also may not be realistic about how and how much they expect to pay for college, suggests the report. Although parents rely mainly on current income to pay for college, recent studies indicate that parents of high school students anticipate using savings and grants as their primary source for paying for college (current income was a distant fourth choice).

The report, "It's All Relative: The Role of Parents in College Financing and Enrollment," was commissioned by the USA Group Foundation, a research and philanthropic organization, and prepared by The Institute for Higher Education Policy, a non-profit education research group in Washington, D.C.

"Parents are struggling at all levels to adjust to higher college prices and changing economic realities to ensure that their children get a quality education," stated Jamie Merisotis, president of The Institute for Higher Education Policy. "Our findings indicate that public and private programs may need to provide more support for parents in planning and saving for college and in heightening awareness about their options."

The study suggests the need for federal, state, and institutionally-based awareness programs that target children of parents who did not go to college. Also highlighted: more simplified application procedures, counseling for borrowers, and more support for lower-income families, including expansion of federal and state need-based student aid and grant assistance. It also suggests that colleges contain costs and increase revenues from non-tuition sources.

Findings also show that 83% of parents discussed their children's career and degree interests with them, 72% helped fill out applications, 65% gave advice on applying to schools, 57% spoke with an admissions officer, and 50% helped in the final choice.

"This report confirms both the increasing burden on families stretching to meet education expenses and the considerable efforts by parents to keep pace financially," said Robert C. Dickeson, head of the USA Group Foundation. "It also raises broader questions for our future about how to balance the relative burden of paying for college."

The study blends recent research on the parental role in higher education with a new, nationally representative survey of 750 parents who had at least one dependent child enrolled in college during the 1997-98 academic year. The study examines the role of parents in higher education financing in order to help clarify fiscal responsibilities among the federal government, states, institutions, philanthropy, parents, and students.

The Institute for Higher Education Policy is a non-profit education research group based in Washington, D.C. The USA Group Foundation is the research and philanthropic arm of USA Group, a non-profit company based in Indianapolis, Indiana, and the nation's largest administrator of student loans.

"It's All Relative: The Role of Parents in College Financing and Enrollment" is the first monograph published in the USA Group Foundation New Agenda Series. It is also available on USA Group's Web site, www.usagroup.com, in the General Public & Media section.